CONSOLIDATED GAS CO. OF FLORIDA v. City Gas Co., No. 83-1010-CIV-MARCUS.

CourtUnited States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida
Writing for the CourtMARCUS
Citation623 F. Supp. 1357
PartiesCONSOLIDATED GAS COMPANY OF FLORIDA, INC., Plaintiff, v. CITY GAS COMPANY OF FLORIDA, Defendant.
Decision Date04 October 1985
Docket NumberNo. 83-1010-CIV-MARCUS.

623 F. Supp. 1357

CONSOLIDATED GAS COMPANY OF FLORIDA, INC., Plaintiff,
v.
CITY GAS COMPANY OF FLORIDA, Defendant.

No. 83-1010-CIV-MARCUS.

United States District Court, S.D. Florida.

October 4, 1985.


623 F. Supp. 1358

William J. Dunaj, Mershon, Sawyer, Johnston, Dunwoody & Cole, Miami, Fla., for plaintiff.

Gary S. Brooks, Fine, Jacoson, Schwartz, Nash, Block & England, Miami, Fla., for defendant.

MEMORANDUM OPINION AND ORDER

MARCUS, District Judge.

THIS CAUSE has come before the Court upon three Motions for Summary Judgment filed in the aforementioned matter pursuant to Rule 56 of the Federal Rules of Civil Procedure and Rule 10J of the General Rules for the United States District Court for the Southern District of Florida: first, Defendant CITY GAS COMPANY of Florida (hereinafter "CITY GAS") seeks final summary judgment in its favor as to the Amended Complaint of Plaintiff, CONSOLIDATED GAS COMPANY of Florida (hereinafter "CONSOLIDATED"), which charges the Defendant CITY GAS with unlawful monopolization and attempted monopolization in violation of Section 2 of the Sherman Act; second, Defendant CITY GAS seeks summary judgment in its favor as to its own Amended Counterclaim insofar as it alleges that Plaintiff CONSOLIDATED in fact violated Section 2 of the Sherman Act for monopolization and attempted monopolization (Count II of Defendant's Amended Counterclaim); and, finally, Plaintiff CONSOLIDATED has moved this Court for summary judgment in its favor on all three counts of Defendant's Amended Counterclaim (which allege violations of Section 1 and 2 of the Sherman Act, and Section 3 of the Clayton Act). Each moving party claims there are no material issues of fact in dispute and that each is entitled to judgment as a matter of law. Only Plaintiff CONSOLIDATED has not moved for summary judgment in its favor as to the contentions which it has made in its Amended Complaint.

Hearing was held on these motions by the Court on October 1, 1985. For reasons stated herein each of the three summary judgment motions are denied.

623 F. Supp. 1359

I. BACKGROUND

By way of preface, a brief outline of some of the background surrounding this case and the charges and countercharges which have arisen should be laid out. Plaintiff CONSOLIDATED has brought suit against Defendant CITY GAS in federal court alleging that the Defendant CITY GAS violated Section 2 of the Sherman Act by monopolizing and attempting to monopolize the natural gas market in south Dade County. Plaintiff has sued under 15 U.S.C. Sections 2, 15 and 26, and the Sherman Anti-Trust Act and Clayton Anti-Trust Act seeking injunctive relief, damages and treble damages, costs and attorneys' fees.

Plaintiff has charged Defendant with possessing and illegally exercising monopoly power over the aforesaid market, and with having wrongfully deprived Plaintiff of access to natural gas while Defendant allegedly took all of Plaintiff's commercial customers and some of its residential customers, thereby destroying Plaintiff's ability to compete. Plaintiff specifically alleges that Defendant derived this monopoly power from a territorial agreement not to compete with People's Gas Systems, the only other major natural gas distributor in South Dade; from a grant to Defendant by the Federal Energy Regulatory Commission (hereinafter "FERC") of the right to purchase natural gas in sufficient bulk to serve many more customers than it serves, and from the fact that Defendant had the only FERC allocation to buy natural gas in the territory it serves; from the fact that Defendant allegedly occupied a "bottle-neck" position regarding the transportation of natural gas in portions of Dade County; and finally from its exclusive possession of essential facilities necessary for providing natural gas service to the relevant market area.

The Defendant CITY GAS has filed an Amended Counterclaim alleging in three counts that Plaintiff violated Section 1 of the Sherman Act by engaging in contracts, combinations and conspiracies having as their purpose and effect the restraint of trade with respect to the purchase and resale of gas products; that Plaintiff violated Section 2 of the Sherman Act in that it unlawfully possessed and exercised monopoly power in the subdivision and that Defendant was substantially prohibited or foreclosed from selling its product within the Bel Air/Point Royale subdivision; and finally that Plaintiff violated Section 3 of the Clayton Act by virtue of an illegal exclusivity agreement between Plaintiff and the subdivision developers and a restrictive covenant running with the land and providing that no liquified or natural gas would be sold unless sold and supplied by Plaintiff within the subdivision, all in violation of 15 U.S.C. Sections 1, 2 and 14.

At the core of Defendant's prayer for relief is the assertion that Plaintiff violated the antitrust laws by these arrangements, improperly binding subdivision customers to purchase gas to be used for power, heating or cooking exclusively from Plaintiff. Defendant contends that as a direct and proximate result of these arrangements, Defendant has been "precluded," or "foreclosed" or "prohibited" or "substantially prohibited" or "delayed" from selling natural gas in the subdivision. Like Plaintiff, Defendant seeks declaratory and injunctive relief, damages and treble damages, costs and attorneys' fees.

The battleground of this case will be fought over the distribution and sale of LP gas and natural gas in a relevant market area deeply in controversy. Both LP and natural gas are used to fuel appliances and to provide general energy needs in homes and businesses. The Plaintiff has distributed LP gas for some twenty years in the Bel Air/Point Royale area in south Dade County to roughly 2000 customers. The distribution and sale of liquid LP gas is not regulated by the Florida Public Service Commission or any other governmental agency. LP gas resale rates, however, were subject to a federal price ceiling from 1973 to 1981. Unlike natural gas which is heavily regulated by government and still remains regulated as to price, petroleum products were deregulated by Executive Order of the President. With the decontrol

623 F. Supp. 1360
of the price of LP gas, but not natural gas, the cost of LP gas has apparently increased substantially more rapidly than the cost of natural gas, and, with that demand for cheaper natural gas has also apparently increased

The Defendant CITY GAS, a public utility, for more than some twenty years, has supplied natural gas to a variety of communities in Dade County, perhaps as many as 100,000 residential, commercial and industrial customers. The purchase of natural gas by Defendant is regulated both as to right and price by FERC; the resale of natural gas is also regulated by the Florida Public Service Commission.

Sometime in early 1982, the Defendant for the first time began to service subdivision customers who had been supplied previously with LP gas by Plaintiff, with natural gas. A lawsuit was filed subsequently by Plaintiff sometime in June of 1982 against Defendant in Dade County Circuit Court challenging Defendant's efforts to place gas mains and lines in utility easements which Plaintiff claimed it had been granted many years earlier. A preliminary injunction was initially granted by the Circuit Court enjoining Defendant from extending additional gas lines into the Bel Air/Point Royale subdivision and a bond was posted. The injunction was subsequently dissolved.

The trial court struck down the easements as being unenforceable because they were "monopolistic," and subsequently the Third District Court of Appeals ruled that that portion of the easement agreement which gave Plaintiff an exclusive franchise did not create an exclusive property right enforceable by Plaintiff as against the Defendant, and that the easement agreement by its terms did not create an exclusive right of way easement. It held that the Defendant was not precluded by the easement agreement from using the land in a manner not inconsistent with the non-exclusive rights vested in Plaintiff. A subsequent settlement agreement arising out of the state litigation was entered into between Plaintiff and Defendant.

After the deregulation of LP gas, Plaintiff applied to the FERC requesting its own allocations of natural gas in order to be able to offer its subdivision customers natural gas. Defendant in turn intervened in Plaintiff's FERC proceedings opposing Plaintiff's request for a natural gas allocation. During the course of the proceedings, Defendant offered to sell natural gas to Plaintiff, first at a cost of ten cents per therm, and finally at a cost of seven cents per therm, a price which Defendant has characterized as reasonable, and Plaintiff has termed as being so prohibitively high that it amounts to a refusal to sell at all.

The instant law suit was filed in federal court on April 22, 1983. The economic battle over the Bel Air/Point Royale subdivision has ebbed and flowed since 1982.

II. DEFENDANT'S SUMMARY JUDGMENT MOTION AS TO PLAINTIFF'S AMENDED COMPLAINT

Defendant has moved for summary judgment as to Plaintiff's Section 2 Sherman Act Amended Complaint, alleging that no material facts are in dispute and that as a matter of law it is entitled to final judgment.

The standard to be applied in reviewing a summary judgment motion is stated unambiguously in Rule 56(c) of the Federal Rules of Civil Procedure:

"The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law."

It may be entered only where there is no genuine issue of material fact. Moreover, the moving party has the burden of meeting this exacting standard. Adickes v. S.H. Kress & Co., 398 U.S. 144,...

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